Cryptocurrencies have been widely used in the world. Although the use was very limited during the initial years, but not anymore. Apart from trading and making transactions on specific platforms, there are plenty of options for shopping now. You can buy a lot of things like a car, airplane, yacht, paintings, art crafts and even branded bags. You can also buy designer shoes and sunglasses and whatever you want.
The use of cryptocurrencies is increasing in the regular shopping market because of a lot of factors. One of the important ones is that you do not have to pay any transaction fee or exchange fee. So you only have to pay the price of the product that you want.
In addition to this, the coronavirus resulted in a boom in the internet-related industry. A lot of people started trading in crypto. It was quite easier because there are software applications like chesworkshop.org.
These applications help you out with everything that you need. They have a user-friendly interface and that is why things are a lot easier than we think. The only difficulty is to find your application for trading. There are plenty of options in these applications like https://www.chesworkshop.org/bitlq/.
Wide use of the cryptocurrencies
Apart from trading, people started to look at many other earning methods through crypto. They all wanted to make money. And some of them want to hide their identity while buying things.
And everyone is getting what they wanted and that was because of crypto.
It is not possible to trace the transactions through cryptocurrencies. Therefore, the people who are dealing with secret funds were using it. Likewise, it was widely is used in the black market.
This wasn’t the problem until the general public started using it too. And because the general public converted their money into digital currency, the economic market got affected.
Banks regulate the finance and economy and get money from people. They had a regulatory fee and maintenance fee. In addition to this, if you make an international transaction through banks, you also need to pay an exchange fee. However, with crypto, there was nothing like that. But this caused problems for the governments as people were using their money as they wish.
As a result of this,
Governments needed to take action. They cannot stop crypto from being in use. However, what they can do is legalize crypto and regulate it. So, that’s what they are doing.
Things were different before. Crypto was free and everyone was using it according to their wish. But if we get governmental regulations, will they affect the market? This is a question that many people ask. Will government regulations affect the prices of cryptocurrencies?
Let’s discuss that.
The simple answer to this question is, Yes. Governmental regulations can have a significant impact on the prices of crypto.
1. Regulating prices of the assets
One of the ways that governments can affect the prices of digital currencies is by setting the prices of the assets. For example, they can set the prices of the fiat currencies. So if you are dealing in an international market, you will need to buy and sell at the given price. You are not working all by yourself.
Just like that, by controlling the prices of the fiat currencies, a lot of things will be under control. The governments will be able to manage the prices and can prevent unauthorized money exchanges.
2. Saddling the assets
The prices of the assets are not under control just because there is a lack of regulations. Therefore, if someone introduces a new currency and takes measures to make it famous, he will have an amazing market. For a cryptocurrency to be expensive, you need to create hype.
Remember the time when Elon Musk tweeted about buying a Tesla through Bitcoin? A single tweet from the owner rose the Bitcoin market to new heights. Just like that, a single rumor can cause a sudden drop too. Last month, millions of dollars were suddenly removed from the Bitcoin market and it resulted in an 8.8 percent market drop.
However, if governments can have better regulations, people won’t suffer from such losses. But at the same time, those who are making profits through much means won’t be able to do that too. So this is a debatable topic whether it is a good thing or not.
Saddling the assets will manage the cost of doing business. There won’t be any unregulated way of controlling the prices.
Developed countries have already regulated cryptocurrencies. Therefore, an approach of saddling the assets is made in the United States. In most of the states, you will need to get surety bonds. If not, you have to get an equivalent amount in fiat currency. This should be in exchange for cryptocurrency. So if you want to exchange your crypto, you can get an equivalent amount of surety bonds.
3. Making assets scarce
Another thing that the governments can do is to make the assets scarce. More regulations will put too many restrictions and this will put people in difficulty. This is will make the asset scarce, as people won’t be much interested in it.
In addition to this, governments can also impose import and export restrictions. These restrictions will again affect the market price of the currencies.
For example, there are some countries that have made import restrictions on gold. These restrictions make the asset less welcomed there. As a result of this, fewer people will be interested in it. Consequently, there will be a drop in the market price.
The market works by demand and supply. More demand and less supply will increase the price. Similarly, less demand and more supply will drop the price.
So if governments make such regulations, cryptocurrencies will surely have a price change. Let’s see what the future brings.